2 High-Yielding TSX Stocks to Scoop Up Before They Recover

Extendicare stock and NorthWest Healthcare Properties REIT can be excellent high-yielding investments to add to your portfolio today.

| More on:
Increasing yield

Image source: Getty Images

Between high inflation, rising interest rates, and broader economic uncertainty, it is not surprising to know that the S&P/TSX Composite Index has spent most of the year in a bear market territory. Of course, this volatility is not all bad. For the savvier income-seeking investors, bear markets create opportunities for them to capture high-yielding dividends.

Broader market selloffs cause valuations to decline across the board. Even the most defensive TSX stocks can see their share prices go down. High-quality dividend stocks see dividend yields become inflated due to lower valuations. Supported by steady cash flows and resilient business models, these companies pay juicier dividends, allowing income-seeking investors to benefit greatly in the long run.

For this purpose, it is essential to identify and invest in dividend stocks that can sustain high-yielding dividend payouts amid market volatility. Today, I will discuss two of my top picks among dividend stocks offering excellent yields.

Extendicare

Extendicare (TSX:EXE) is a $576.12 million for-profit company providing long-term-care services. Offering housing, care, and other related services to seniors, Extendicare operates over 100 care facilities across Canada.

Headquartered in Markham, it is a business supported by steady and stable cash flows. The company generates significant revenue through long-term-care services and gets ample money through home healthcare services, and it is constantly growing its operations.

When the company posted its third-quarter earnings for fiscal 2022, it reported an 8.7% growth in its revenue. Despite the growth, it reported an overall adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) decline of 32%, owing to increased wages and higher operating and administrative expenses. Despite the drop in its financial performance, the company’s improving occupancy rate can drive growth in the coming quarters.

As of this writing, Extendicare stock trades for $6.66 per share. Down by 16.75% from its 52-week high, Extendicare stock boasts a juicy 7.21% forward dividend yield that is too attractive to ignore.

NorthWest Healthcare Properties REIT

NorthWest Healthcare Properties REIT (TSX:NWH.UN) is a $2.37 billion market capitalization real estate investment trust (REIT) specializing in the healthcare industry. Headquartered in Toronto, NorthWest Healthcare Properties owns and operates over 230 healthcare properties across several countries. Most of its portfolio has long-term rental agreements, bringing in stable and predictable cash flows.

With an average lease expiry on most of its properties standing at around 14 years, NWH REIT’s cash flows are likely secured enough to see it through the current market volatility. Its high occupancy and rent collection rates reflect its financial strength.

Despite its defensive business model, the REIT reported some decline in its third-quarter earnings for fiscal 2022. A few non-recurring expenses combined with higher interest rates, increased leverage, and lower management fees caused its adjusted funds from operations to drop by 22% in the quarter.

Despite the decline, the company’s management is hopeful for improvements in the coming months. With several measures set in place to decrease its leverage and plans to expand to more profitable markets, it looks well positioned to recover soon.

As of this writing, NWH REIT trades for $9.88 per share. Down by 31.48% from its 52-week high, it boasts a juicy 8.10% dividend yield that it pays out in monthly distributions.

Foolish takeaway

A warning to eager investors: despite the defensive nature of the underlying businesses, these two stocks can post further declines in the coming weeks. Investing in the two companies at current levels will let you capture high-yielding dividend income.

If and when the stocks recover, their dividend yields will go down. You must invest in these two stocks with care, considering that more trouble in the market can send their valuations down further.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

More on Dividend Stocks

grow money, wealth build
Dividend Stocks

Got $3,000? 3 TSX Growth Stocks to Buy in January 2023

Top TSX growth stocks that look appealing for 2023.

Read more »

woman data analyze
Dividend Stocks

Need Passive Income? Turn $15,000 Into $851 Annually

This passive-income stock is already climbing higher, up 16% in the last three months! Yet it's still valuable, so you…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

Retirees: 3 Reliable Canadian Dividend Stocks to Buy Now for Passive Income

Top TSX dividend stocks now appear oversold.

Read more »

Dividend Stocks

For $100 in Passive Income Each Month, Buy 1,500 Shares of This REIT

REITs such as Northwest Healthcare can enable investors create a passive-income stream as well as benefit from capital gains.

Read more »

A colourful firework display
Dividend Stocks

2 Canadian Growth Stocks (With Dividends) to Start 2023 With a Bang

Here are two of the best dividend-paying Canadian growth stocks you can invest in at the start of 2023 and…

Read more »

sale discount best price
Dividend Stocks

4 Insanely Cheap Canadian Stocks to Buy for Passive Income

The recent bear market has created some incredible bargains, especially for those looking for passive income. Here are four cheap…

Read more »

A bull outlined against a field
Dividend Stocks

3 Cheap Stocks I’d Buy Before the Bull Market Arrives

Undervalued TSX stocks such as Savaria and Well Health can help investors generate market-beating gains when markets recover.

Read more »

Increasing yield
Dividend Stocks

5 Canadian Dividend Stocks With Yields of 4% or More

If you want dividends that yield over 4%, you don't have to look far. Here are five large-cap Canadian stocks…

Read more »